Every so-called cure to the foreclosure mess is not a true remedy. As many homeowners have discovered, some medicine is actually worse than the disease. This is proving to be more fact than fiction in the foreclosure crisis than ever before; so-called foreclosure prevention programs are destroying financial lives.
Below are three foreclosure prevention traps which homeowners must avoid:
- Foreclosure prevention scams that promise you the moon and deliver disaster. So you’ve fallen a few months behind on your mortgage and maybe you’ve even been sued by a creditor or two. All of a sudden you start receiving letters in the mail, promising you that they can save your home from foreclosure, money-back guaranteed. Don’t you believe it! Any foreclosure saviors out there claiming to have the ability to save your home from foreclosure for a few hundred or thousand dollars are trying to sell you the proverbial bridge in some unnamed town, so don’t fall for it. Only bankruptcy is guaranteed to stop the foreclosure process.
- Homeowners need to be wary of HAMP and other “modify this mortgage and magically save your home from foreclosure” programs. To be fair, many people have successfully saved their homes with HAMP but even more people have been damaged by the execution of this program. If you’re applying for the HAMP foreclosure prevention program, watch out for “reverse approvals.” “Reverse approvals” are these really nasty letters that homeowners receive after they’ve already been in the mortgage modification for a few months (i.e. the 3-month trial period). The “reverse approval” letter often claims that the homeowner actually never qualified for the program and must now pay back the money they didn’t pay plus penalties, and that they will now be facing foreclosure if they don’t catch up on those payments quickly.
- Closely related to the HAMP foreclosure prevention trap is the “wait while we lose your paperwork and entangle you in a bureaucratic red tape nightmare,” we’ll just call it the “wait and see us foreclose on you” trap. While the “wait and see us foreclose on you” trap often appears in the HAMP program it can rear its ugly head in any foreclosure negotiation. While the homeowner patiently waits for the mortgage lender to approve/deny their proposed plan to rectify their delinquent payments, the mortgage lender quickly and unceremoniously proceeds with the foreclosure process.